Tuesday, September 30, 2008

Just Pointing Out the Obvious

In the wake of yesterday's massive tumble in the market and so far, today's massive Buy-A-Thon, I just want to point you to one thing that is incredibly telling. If the Dow Jones Industrial Average just keeps swapping one stock for another, isn't the baseline artificially raised? If the Dow just cherry-picks the stocks they want and does not diversify their indices, what good is that index anyway?

"Hell, Jimmy, Multi-Colored Underwater Basketweaving, Inc is kicking ass, let's drop Edison's Eight-Track Tape Division and replace it with MCUB! The Dow will take off!"

You see, Kraft Foods just entered the index for the Dow in place of AIG on September 18, 2008. Please understand that AIG Financial Holdings collapsed in the wake of the Fannie and Freddie slides. Wonder why the Dow didn't add a comparable holding to replace the failed financial institution? You know, like another insurance company, bank, or lending institution?

Because of the volatility of that industry. Kraft sells FOOD, folks. Their value is much more stable in the short term and lets the Dow give the APPEARANCE of stability of the blue chip market.

Do NOT be fooled. This is a house of cards and NOTHING that the government or the Dow can do will make this flimsy thing stand up any better. When the Democrat's further minimum wage increases hit next July, this market will crumble, too, because of the necessary Kraft Foods layoffs.

Dig your heads from your mud ditches.

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